Topic Contracts > Characteristics > Freedom to Contract
ISSUES
Case No. G.R. No. L-47806; April 14, 1941
Case
Gabriel vs Monte de Piedad
Name
Full Case LEONCIO GABRIEL, petitioner,
Name vs.
MONTE DE PIEDAD Y CAJA DE AHARROS and
THE COURT OF APPEALS, respondents.
Ponente Laurel, J.
Doctrine The freedom of contract is both a constitutional and
statutory right and to uphold this right, courts should move
with all the necessary caution and prudence in holding
contracts void.
Nature Petition for review by way of certiorari of the decision of the
Court of Appeals which affirmed the judgment of the lower
court, ruling in favor of Monte de Piedad.
RELEVANT FACTS
Petitioner Leoncio Gabriel was employed as an appraiser of jewels in
the pawnshop of Monte de Piedad from 1913 up to May 1933. On
December 31, 1932, he executed a chattel mortgage to secure the
payment of the deficiencies which resulted from his erroneous appraisal
of the jewels pawned to the appellee, amounting to P14,679.07, with 6%
interest. Gabriel averred that the chattel mortgage was a part of a cheme
on the part of Monte de Piedad to cover up supposed losses incurred in
its pawnshop department and that it was based upon all non-existing
subject matter and non-existing consideration. With these, Gabriel
contended that the provisions of the chattel mortgage contract were
contrary to law, morals and public policy, and hence, such contract was
ineffective and the principal obligation secured by it is void.
Respondent Monte de Piedad filed a complaint in the Court of First
Instance to recover the aforementioned sum less what had been paid
amounting to P3,333.25 and in case of default, to effectuate the chattel
mortgage.
Petitioners appealed to the Supreme Court by way of certiorari.
1. Is the chattel mortgage void on the ground that it is contrary to
law, morals and public policy?
2. Does the chattel mortgage have a valid consideration?
RATIO DECIDENDI
1. Is the chattel mortgage void on the ground that it is contrary to
law, morals and public policy?
NO. Examining the contract at bar, the Court is of the opinion that
it does not in any way militate against the public good, neither
does it contravene the policy of the law nor the established
interests of society.
A contract is to be judge by its character, and courts will look to the
substance and not to the mere form of the transaction.
The freedom of contract is both a constitutional and statutory right and
to uphold this right, courts should move with all the necessary caution
and prudence in holding contracts void. A contract contrary to public
policy is one that has a tendency to injure the public, is against the public
good, or contravenes some established interests of society, or is
inconsistent with sound policy and good morals, or tends clearly to
undermine the security of individual rights, whether of personal liability
or of private property.
2. Does the chattel mortgage have a valid consideration?
YES. There is a sufficient consideration in the contract as it was
satisfactorily established that it was executed voluntarily by Gabriel
to guarantee the deficiencies resulting from his erroneous
appraisals of the jewels.
A consideration is some right, interest, benefit, or advantage conferred
upon the promisor, to which he is otherwise not lawfully entitled, or any
detriment, prejudice, loss, or disadvantage suffered or undertaken by the
promise other than to such as he is at the time of consent bound to
suffer.

A pre-existing liability is a good consideration for a promise. The fact

that the bargain is a hard one will not deprived it of validity. The
exception to this rule in modern legislation is where the inadequacy is so
gross as to amount to fraud, oppression or undue influence, or when the
statutes require the consideration to be adequate.

Reminder: Read the full text! Don’t be lazy.

DISPOSITIVE

The petition is hereby dismissed and the judgment sought to be reviewed

is affirmed, with costs against the petitioner. So ordered.